DealBook Briefing: The Big Problems Facing the Trade Talks

China trade talks turn to currency

This week’s trade negotiations between the U.S. and China will have to bridge a lot of gulfs between the two countries. One particularly tricky issue is that Washington wants Beijing to adopt a policy that would keep the value of China’s currency stable. More on that from Bloomberg, citing unidentified sources:

• “While the precise wording remains unresolved, a pledge of yuan stability has been discussed in multiple rounds of talks in recent months and both sides have tentatively agreed it will be part of the framework of any final deal.”

• “The Trump administration has been clear in its talks with Beijing that any attempt to depreciate the yuan — a strategy aimed at offsetting existing U.S. duties on Chinese imports — would be met with more or higher American tariffs.”

• But currency stability may be at odds with other policies. “A U.S. request for Beijing to keep the yuan from depreciating is also potentially difficult to square with Trump and past U.S. administrations’ calls for China to adopt more market-driven reforms and complaints that Beijing manipulates its currency to gain a trade advantage.”

There are other contentious issues.The FT rated the chances of success of several critical issues being discussed this week, from stronger protections of intellectual property rights (likely to happen) to the cessation of hacking (much less likely).

And any deal would need enforcement measures. CNBC reports that unidentified officials from the U.S. Chamber of Commerce believe a deal would be meaningless if there aren’t mechanisms such as automatic tariff increases to punish China if it fails to keep its promises.

But there appears to be less time pressure. President Trump said yesterday that the March 1 deadline for reaching an agreement “is not a magical date,” adding that “a lot of things can happen.”

Can Theresa May get what she wants from Brussels?

The British prime minister is meeting with European officials today in an attempt to reach a final compromise that would save her Brexit plan. It won’t be easy.

Her goal is to revise the deal. “The British government sees May’s meeting on Wednesday with European Commission President Jean-Claude Juncker as a crucial chance to get legally binding changes” to the agreement, Bloomberg reports.

She has dropped some controversial ideas to help her position.The FT reports that the notion of using technology to solve issues surrounding the Irish border — a plan considered unworkable by E.U. officials — has been abandoned.

But Europe still isn’t budging. “There isn’t enough movement for me to be able to expect this to be a discussion with a concrete outcome,” Mr. Juncker said yesterday, later adding “I’m losing my time with this Brexit,” according to Bloomberg.

How a Bernie Sanders presidency would affect business

The Vermont senator finally tossed his hat into the 2020 ring yesterday, becoming the latest candidate seeking the Democratic Party nomination. Mr. Sanders quickly became one of the most formidable candidates: He raised more than $4 million from individual donors in just one day and retains a big fan base from his 2016 run.

CNBC breaks down how Mr. Sanders would affect the business world should he become president:

• His Medicare-for-all concept, introduced in 2017, proposes moving Americans away from private health insurance to a government-provided policy. He has also pressed to cut drug prices.

• He has long criticized big banks, and has fought to break up institutions like JPMorgan Chase and Goldman Sachs. Earlier this month, he also teamed up with Senator Chuck Schumer, Democrat of New York, on legislation to limit companies’ ability to buy back stock.

• He wants a higher minimum wage of $15 an hour, and has put pressure on Amazon, Walmart and other companies to follow suit.

But there’s a big caveat to his 2020 odds. As Sydney Ember of the NYT notes: “Much of his populist agenda has been embraced by other Democrats, at a time when many voters are eager to elevate female and nonwhite standard bearers.”

California and the U.S. hit an impasse over vehicle standards

• The Environmental Protection Agency and the National Highway Traffic Safety Administration had been meeting with California’s Air Resources Board to try and compromise on a replacement for Obama-era fuel efficiency standards.

• “The breakdown in talks adds to tension between Washington and Sacramento, which has emerged as a major antagonist to the Trump administration.”

• “No further discussions are scheduled over the critical auto industry rules, said the people, who asked to not be identified discussing the private talks.”

• California is America’s biggest auto market, and as such has set a de facto national standard for auto emissions.

How Trump tried to stymie investigations

The NYT took a deep dive into how President Trump has sought to clamp down on the many investigations that touch upon his presidency over the past two years. Among the incidents the newspaper uncovered:

He tried to install a loyalist as head of the Michael Cohen inquiry. “He asked whether Geoffrey S. Berman, the United States attorney for the Southern District of New York and a Trump ally, could be put in charge of the widening investigation, according to several American officials with direct knowledge of the call,” the NYT reports. The acting attorney general at the time, Matthew Whitaker, demurred.

He wanted a misleading public statement about Michael Flynn’s resignation. As White House officials discussed how to explain the departure of Mr. Flynn, Mr. Trump’s first national security adviser, amid an F.B.I. investigation, the president asked Sean Spicer, then the press secretary, to say he had requested Mr. Flynn’s resignation. When Mr. Spicer asked if that was true, Mr. Trump responded, “Say that I asked for his resignation.”

He has sought to discredit the special counsel, Robert Mueller. With the arrival of Rudy Giuliani on his legal team, Mr. Trump “decided to combine a legal strategy with a public relations campaign in an aggressive effort to undermine the credibility of both Mr. Mueller and the Justice Department,” the NYT reports. The result: Polls last summer showed more Americans distrusted Mr. Mueller, prompting Mr. Giuliani to say, “I think we’ve done really well.”

The S.E.C. wants to make I.P.O.s easier

The Securities and Exchange Commission unveiled a proposal yesterday that would let all companies — not just certain small ones — confidentially discuss potential I.P.O. plans with investors before committing to the process, the WSJ reports:

• “The conversations would allow companies to identify information that is important to investors and to gauge market interest before formally announcing a public offering.”

• “Making it easier and more appealing for companies to go public has been a central goal of S.E.C. Chairman Jay Clayton. The number of public companies has fallen by nearly 50 percent since the late 1990s.”

• But this potential change isn’t as revolutionary as others the S.E.C. has proposed, Anna Pinedo of the law firm Mayer Brown told the WSJ. “It’s not going to single-handedly change if a company was going to decide to go public or not,” she said.

Walmart had a great quarter — and an awful morning

The American retail giant is riding high after a banner earnings report yesterday, with its shares up as much as 4 percent in Tuesday trading. Here’s why:

• Profits rose 69 percent to $3.69 billion.

• Online sales were up 43 percent during the quarter, matching the company’s goal.

• Same-store sales in the U.S. were up 4.2 percent in the quarter, above the 3.2 percent that analysts had expected.

Why housing (probably) won’t start a recession

• “The housing sector accounts for as little as 3 percent of economic output during recessions and about twice that during booms. Other pieces of the economy are much bigger, but they don’t change nearly as much from boom to bust.”

• “The most recent recession, from 2007 to 2009, offered one of the more exaggerated examples of housing’s guiding role in downturns. A recent report from the Federal Reserve Bank of St. Louis found that the construction sector accounted for a little over a third of the decline in output in the past recession.”

• “How does housing look now? Mixed, but mixed in such a way that the things most important to economic growth are the most stable.”

• “When economists talk about a recession in housing, they largely refer to construction, not home prices,” and “construction is bordering on moribund.”

• “In other words: Housing is in recession already. It might not get better soon, but it probably won’t get worse.”

• Microsoft says hackers associated with Russian intelligence tried to breach European think tanks and nonprofit organizations in the run-up to elections in May. (NYT)

• Germany is reportedly leaning toward allowing Huawei technology in its wireless networks. A British defense think tank has called the use of the Chinese company’s technology on 5G networks “irresponsible.” (WSJ, FT)

• A federal judge delayed a lawsuit about a Pentagon cloud computing contract — that Amazon was expected to win — over “new information” about possible conflicts of interest in the procurement process. (WSJ)

• QuadrigaCX customers are trying to hunt down funds currently locked away because they’re secured by a password known only to the company’s late C.E.O. (WSJ)

Best of the rest

• McKinsey & Company will return $15 million in fees to resolve an investigation into allegations that it did not make required disclosures while working on bankruptcies. (NYT)

• Nissan and Renault look set to clash over whether they should share the same new chairman. (FT)

• The extradition to the U.S. of Roger Ng, a former Goldman Sachs banker who faces fraud charges over his involvement in the 1MDB scandal, could be delayed. (Bloomberg)